Good afternoon. My name is Vivian, and I will be your conference facilitator. At this time, I would like to welcome everyone to Analog Devices Third Quarter Fiscal 2011 Earnings Conference Call. [Operator Instructions] Thank you. Ms. Kohl, you may begin your conference.

Mindy Kohl

Thanks, Vivian, and good afternoon, everyone. This is Mindy Kohl, Director of Investor Relations. We appreciate you joining us for today's call. If you haven't yet seen our third quarter fiscal 2011 release, you can access it by visiting our website at www.analog.com and clicking on the headline in the news section of our homepage. This conference call is also being webcast live from Analog.com, select Investor Relations and follow the instructions shown next to the microphone icon. A recording of this conference call will be available today, within about 2 hours of this call's completion and will remain available via telephone playback for one week. This webcast will also be archived at our IR website.

Participating in today's call are Jerry Fishman, President and CEO; Dave Zinsner, Vice President of Finance and CFO; and Vincent Roche, Vice President of Strategic Market Segment and Worldwide Sale. During the first part of the call, Jerry and Dave will present our third quarter results as well as our short-term outlook. The remainder of the time will be devoted to answering questions from our analysts and participants.

During today's call, we may refer to non-GAAP financial measures that have been adjusted for certain nonrecurring items in order to provide investors with useful information regarding our results of operations and business trends. We have included reconciliations of these non-GAAP measures to the most directly comparable GAAP measures on today's earnings release, which is posted on the IR website. In addition, we have updated the schedules on our IR website, which include the historical quarterly and annual summary, P&L for continuing operations, as well as historical quarterly and annual information for revenues from continuing operations by end market and product type.

Next, I'd ask you to please note that the information we're about to discuss includes forward-looking statements intended to qualify for the Safe Harbor from liability, established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include risks and uncertainties and our actual results could differ materially from those we will be discussing. Factors that could contribute to such differences include, but are not limited to those described in our SEC filings, including our most recent report on Form 10-Q.

The forward-looking information that is provided on this call represents our outlook as of today and we do not undertake any obligation to update the forward-looking statements made by us. Subsequent events and developments may cause our outlook to change. Therefore, this conference call will include time-sensitive information that may be accurate only as of the date of the live broadcast, which is August 16, 2011. With that, I'll turn the call over to ADI CEO, Jerry Fishman

Jerald Fishman

Well, good afternoon. As you know, from this afternoon's press release, ADI's revenues for the third quarter were approximately $758 million, which was up 5% from the same quarter last year but down 4% sequentially from Q2. As you may recall, we were somewhat cautious about our Q3 revenues, given our well-above seasonal 9 to 10 revenue increase sequentially in Q2, which we believe was in part, the results of inventory builds in the supply chain due to Japan earthquake-related supply chain disruptions and the fear of industry-wide supply reductions.

It now appears as if customers built more inventory than we anticipated last quarter, and they liquidated it more rapidly than we had planned for. Notwithstanding these perturbations in supply, most of the end markets we serve remain relatively stable in Q3, particularly the communications market, the automotive market and also the industrial markets.

Our Consumer business recovered slightly in Q3, but less than we have planned at the beginning of the quarter. Our revenues in Q3 were impacted by 2 distinct drivers, both of which we believe had more to do with supply-chain issues than end demand. First, a portion of the revenue shortfall was a result of a few communications infrastructure customers, delaying orders to ADI in response to component shortages from other vendors, as well as the liquidation of excess safety stocks that they built in Q2. Our shipments to these customers returned to more normal levels in July.

While there were many other puts and takes at our other large customers, for the most part, revenue at those customers was in line with our forecast. The balance of the shortfall was from the 50,000 small and midsized customers, served through our distribution channel. Our distributors report that their customers have been burning off excess inventory, particularly from suppliers like ADI, who had consistently short lead times and kept up with the increased order rates that we experienced in the second quarter.

Recent conversations with our 2 largest distributors indicate that inventory reductions are proceeding in an orderly fashion with few cancellations and few backlog adjustments. I think it's instructive to look at the end market trends in both Q2 and Q3 to better understand these trends and most importantly, the implications of those trends going forward.

Industrial revenues declined 5% sequentially in Q3 after growing 14% sequentially in Q2. This looks to us like an inventory build in Q2 that was reversed in Q3. On a year-over-year basis, industrial sales for the quarter grew 8%, which is consistent with our expectations for the industrial business over the long term.

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